© 2019 SourceMedia. All rights reserved.

Preparing for Uber-Regulation

Preparing for Uber-Regulation

With growing frequency, we are hearing of corporate malfeasance, individual wrongdoing and just plain stupid behavior within the financial services industry. 

A story from my early days in the industry well illustrates some of the dangers that clients may face when working with planners and advisors. When I first received my CFP designation after three years of hard work, I knew enough about retirement planning, insurance, investments and taxation to sound good, but I was uncomfortable giving complex advice to wealthy clients where large amounts of money were at stake. 

Because of my fiduciary duty to clients, I was careful to steer clear of serious discussions about things I didn’t know. Wisely, I referred clients to other professionals, or joined with more-senior advisors where I was working.

I could have faked it and caused potential harm to clients, but I chose the other path. Acting in the best interests of our clients is what we should all be striving for, no matter what the current regulatory environment is.

All advisors should be closely following the controversial proposed Department of Labor rule on fiduciary standards, of course. Whatever your thoughts are on that particular regulation and its potential effects on clients, our firm’s belief is the domestic planning component of our business will be increasingly regulated because self-governing mechanisms just aren’t working.

How can firms prepare for uber-regulation and turn this into a business advantage? They can start by exercising appropriate due diligence and operating in a manner consistent with the highest professional fiduciary standards available today. 

While reading this column, you should be asking yourself: 

1. Does this matter to my business?

2. If it does matter, how do I assure I’m operating to the highest fiduciary standards?

3. How does doing this make me more competitive and profitable? 


In most developed countries other than the United States, the giving of financial advice is regulated by the central government.

Many U.S. advisors are currently subject to some combination of NASD, SEC and state regulations for investments and insurance.  These regulatory organizations, especially the state agencies, could easily expand their authority to the giving of financial advice. 

Why might they do this? Well, consumers are concerned, and rightfully so. There is a lack of confidence by many when it comes to working with advisors. In several egregious cases of bad behavior on the part of firms or advisors, state attorneys general have successfully prosecuted them — sometimes out of existence.

For potential clients trying to find a trusted advisor, there has historically been little they can do to assure they find a professional fiduciary.


Repeated surveys of our clients at Savant Capital Management indicate when it comes to their advisors, clients are highly concerned about trustworthiness, reliability, focus on their particular issues and placing their interests first.

In a phrase, what they want and need is a professional fiduciary.  For these reasons, we wanted our firm to be set apart as an organization meeting the very highest of the current available fiduciary standards.

We tested the idea of adhering to published standards by discussing it with clients. Not surprisingly, both clients and prospects agreed this was a positive step in building and maintaining their confidence about our business behavior.

Thus, if you want a steady stream of qualified prospects and new clients, one part of your marketing equation must be your ability to assure these folks of your fiduciary qualifications and status. 

To accomplish this, Savant Capital Management decided to undergo an assessment by CEFEX, the Center for Fiduciary Excellence, located in Toronto and Bridgeville, Pa.

CEFEX uses ISO-like standards to audit and annually certify investment advisors, stewards and managers.  Using quantitative and qualitative criteria, an analyst performs a review that measures adherence to generally accepted fiduciary practices.

CEFEX certification would simply be clever advertising if nothing else happened. 

However, some certifications are a self-fulfilling prophecy: 32 years ago, when I  first became involved in planning, it wasn’t clear how the different designations and certifications would influence a potential client’s decision on whether to work with the firm or not.  As practice standards and ethics were defined by the CFP Board, it became clear how we had to operate. 

Now we face the same issues with fiduciary behavior.  We have the standards, and it’s time to get on board.

Our firm was proactive in the promotion of our certification while organizing our processes, procedures and systems to conform to high fiduciary standards. 

Along with other firms in the Zero Alpha Group, a study group in which we participate, we published a paper titled “Fiduciary Matters,” which details the standards and activities of professional fiduciaries, and methods to evaluate firms for their level of competence and compliance.

This paper has gone to every client and prospect to let them know why this is important and what we are doing about it.


Everything in this column would hardly be worth mentioning, except for the ever-present worries about possible future regulatory changes. 

How long will it be before the next financial crisis happens as a result of stupid behavior in our industry that precipitates significant regulatory intervention? 

At that point, where do you think investors will go to assure themselves that their firms will behave according to the mandated fiduciary requirements? 

That’s right: They are likely to turn to the CEFEX-certified firms. 

We see fiduciary certification becoming an integral part of best practices for firms in the advisory and wealth management business, just as the CFP certification became a necessary part of our business years ago. As Yogi Berra put it: “It’s like déjà vu all over again.”

As a Center for Fiduciary Studies publication notes,  “the professional doesn’t care what name a compliance officer will allow on his or her business card: the real professional is going to provide a level of care that exceeds what has been deemed acceptable by the rest of Wall Street.”

As advisors, you should become differentiated via certification to the most stringent standards that are currently available.

Your clients and prospective clients will thank you, and your business should be the better for it.

Read more:


For reprint and licensing requests for this article, click here.